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Big projects to push Bahraini GDP up by 3.5% in 2014

Housing, utilities and education to drive growth, although growing deficit is a concern.

By Ed Attwood

Mon 30 Jun 2014 10:34 AM

A series of large infrastructure projects will lift Bahrain’s non-oil GDP growth by 4.4 percent this year, increasing the size of the overall economy by 3.5 percent, according to a report released by the country’s Economic Development Board (EDB).

The EDB’s June research note cited $3.4bn worth of housing, utilities and education projects that are set to be completed by 2017 as being the main driver behind Bahrain’s non-oil sector growth.

The Ministry of Housing is aiming to build 15,000 units in the country between this year and 2017.

The report also made reference to the expansion of Bahrain International Airport, which is expected to begin before the end of this year, and the rail link between the country and neighbouring Saudi Arabia, which is expected to be completed within 10 years, as catalysts for future growth.

Bahrain’s economy grew by 5.3 percent last year, against a 3.4 percent increase in 2012, although this gain was largely due to a 15.3 percent gain in the hydrocarbon sector as an offshore oil field came back online after a period of maintenance.

The EDB said that oil-sector growth this year would be negligible at 0.1 percent.

Bahrain is also hoping to see foreign direct investment (FDI) cross the $1bn mark this year, after having recorded inflows of $989m last year, an 11 percent gain on the year before. The EDB report said that the value of Bahrain’s inward FDI stock is equivalent to 55.3 percent of GDP.

However, the research also cited the rise in the country’s deficit, which rose from 2 percent of GDP in 2012 to 3.3 percent last year. The public debt-to-GDP ratio stood at 43.6 percent at the end of 2013, while the International Monetary Fund warned in April that this could rise to nearly 68 percent by 2017, if Bahrain does not reform its spending policies.

"The investment in core infrastructure will not only drive growth in 2014, but also have much longer term economic and social benefits for Bahrain,” said Kamal Bin Ahmad, Bahrain’s Minister of Transportation and the acting CEO of the EDB, in a press statement.

“Whilst growth from the oil sector will remain flat, there are also several significant projects underway. Overall the outlook is positive, both for this year and moving forward."